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Russia – New law restricting use of temporary labour to come into force in 2016

25 March 2015

At a time when companies have the greatest need of flexibility, the Russian government has announced a new law that will restrict the use of temporary labour, reports The Moscow Times.

The federal law on the restriction of the use of ‘outstaffing and contract labour’ will come into force on 1 January 2016, but companies are already preparing for the change.

The new law restricts the use of temporary staff to nine months. It may not affect projects of a shorter duration, but presents a challenge to clients and recruiters for contracts of longer periods.

According to The Moscow Times, demand for temporary workers has increased as companies adjust to changes in markets and the economy.

"It is a reflection of volatility in the labour market," said Galina Melnikova, General Director of ManpowerGroup Russia & CIS. "The use of temporary staff is a good option if you have the budget for it. You still have to pay the money but you put some of the risk on us, the recruitment agencies.”

“Outstaffing agencies do more than handle payroll,” explained Irina Avdonina, General Director of ANCOR Staff Leasing Company. “They may also perform introductory training, the allocation of staff and tasks, internal communications, procurement, and other functions.”

“However, new legislation from January next year will make this more difficult and will affect about 90% of ManpowerGroup's clients who use temporary staff,” Ms Melnikova explained. "The new law says they can borrow staff for up to nine months. But if their projects last for longer than nine months, they will have to buy the service. The service means the whole process up to the final result, and that makes our service more extensive.”

“If the company has 3,000 people, the agency must review every single job in order to allocate the function to the categories of services and structure the services' key performance indicators (KPIs) accordingly. These services will form the nature of the agreement with the client. This is a challenge.”

"All the salaries and packages are different, so we cannot offer an average fee. People are different: A sales manager may have three, five or 10 years' experience and therefore a different salary. In addition, the actual payment can rise or fall because of bonuses, all of which has to be reported to the tax authorities," Ms Melnikova explained

“Agency labour acts as a buffer in times of economic volatility,” added Vladimir Telyatnikov, Managing Director of Recruitment Brightmen Solutions, part of the Cornerstone group of companies.

“Managers are under pressure to reduce headcount, but fear being left without enough hands on deck. One solution is to "hide" staff in outstaffing,” said Mr Telyatnikov. “Officially the staff has been reduced, but sufficient numbers are available to do the job. At a time when there is a cautious approach to recruitment, the use of agency labour can help select the best staff by acting as a trial period of three to six months.”

He welcomed one aspect of the new law, which was formulated after many years of debate: “At least it addresses the question of legalising the outstaffing business. However, it has done so in a form that frustrates both outstaffing companies and their clients.”

At one stage, the Duma had considered banning temporary staffing altogether and there were also indications that they were considering banning foreign staffing agencies so the new legislation, while not perfect, could have been much worse. Nevertheless, the local staffing industry had hoped that legislators in the State Duma would take greater account of actual conditions in the market.

"Unfortunately, despite the willingness of market participants to take part in the discussion of pressing issues, lawmakers did not appreciate the initiative and relied only on the current Labour Code, which is also in need of updating and revision on many points," Mr Telyatnikov said.

Grey areas, however, include the nine-month limit to contracts. “Can agencies rehire a temporary worker for consecutive terms of nine months, or can they legally hire someone else in his place,” he asked.

One positive change is that the law requires salaries to be identified. It means unscrupulous agencies will not be able to bid for contracts based on improbably low wages or insufficiently qualified staff.

“Experienced agencies always insist that leased staff should not have initially lower or worse wage conditions than regular employees. The fact that it is now written in the law helps a lot," Mr Telyatnikov concluded.